Culture and Strategy

 
Culture Eats Strategy for Lunch

Culture and strategy

Introduction

In the strategic literature the need to develop a strategy that requires the foundations of a culture that is compatible with the intended strategy is widely recognized. However, what is less widely understood is what happens when you have to fast track both cultural and strategic change when the strategy and its desired outcomes are both incompatible with the culture of the organization. How should managers deal with these challenges? How should such cultural appreciations be brought in to the discussion to develop and implement the business strategy?

Cultural change is strategic change

It is important to understand cultural change as also involving strategic change. Strategy can be considered as a cultural production that may involve cultural adaptation, or transformation, or both. This conceptualization is particularly useful if the organization is “betwixt and between” cultures and organizational identities i.e. a local authority department aspiring to become a commercially driven company. I will use a case study of such an organization that was changing from a council department into a Limited Liability Partnership to flesh out some ideas that illuminate the relationship between strategic development and organizational culture.

Culture is not like a skin that an organization can discard as it selects a new organizational culture that is perceived to have strategic fit with its commercial strategy. In my view culture is the organization. Therefore, when an organization faces considerable market forces to change its strategy it can not simply change its culture at will to avoid cultural and strategic incompatibility. The organization has to recognize the miss match between its culture and its strategy and factor the cultural change process in terms of time and resources into its strategic change programme. Many organizations do not acknowledge the importance of culture in either supporting or undermining the design, implementation and success of strategy. This dilemma is magnified when a public sector organization is forced to face up to wider market forces and requires to design and implement a commercial strategy aimed at securing the economic survival of the organization. This process involves moving away from the identity of a council department to that of a business trading in an open market. The change in strategy and the change in culture have to occur simultaneously. If the commercial strategy has a three year time frame then the change in culture requires a three year time frame with an additional year for preparation and consultation with all the key stakeholders frame also.

Part of the change process for the case organization involved developing a commercial strategy to move into more profitable markets and to change the operating culture of the organization from that of a public sector mentality to that of a commercial orientation. In the case organization “strategy work” was mainly emergent with a loose composition of formal strategic goals. For the organizational leadership to avoid strategic drift it required to understand the strategic position of the organization from an organizational cultural perspective. The leadership then needed to communicate this strategic position as a case for cultural change if the organization was to evolve as a commercial enterprise and to

Cultural analysis and strategic planning

One way to assess the strategic position of  an organization from an organizational cultural perspective would be, with the aid of cultural theme analysis to determine the cultural themes that would be incompatible with the new strategy and which therefore may impede its chances of success. This diagnostic process is also useful investigate what changes would be required of key stakeholders regarding their internalized perception that strategy is politically imposed to the new view that their market focus and independent thinking can craft strategy. In the case organization as with many organizations, political and cultural processes can obstruct thorough analysis and formal rational thinking and impede the rigid application of formal change strategy. The organizational culture of the case organization and that of its wider business environment (the council and central national government) unquestionably influences strategic thinking. The political view of cultural change is critical here as the case organization has powerful factions, divisional leaders, middle managers and political masters with conflicting political agendas. Filtering out what is important i.e. culturally strategic and what is not, is an issue for the case organization. This filtering process will involve dialogue across divisional silos and the draining of the defensive moats.

To change, or to manage corporate culture, means that one has to be able to define and therefore pin point exactly what it is one is trying to change. Cultural change by its very nature is rather nebulous. If the organization is targeting a change in the culture of its management team then spending time discussing what it is one is trying to change is critical. Only too often organizations claim that they need to change their culture or improve upon their leadership qualities in relation to their management teams. However, they assume that they collectively understand the concepts of culture and leadership but often they don’t. They also rarely discuss as a team what these concepts should mean to the organization and also to themselves. This inability to critically discuss and reach agreement as a team what concepts such as culture, strategy, leadership, and change management mean to themselves and how such interpretations can guide and influence strategic change efforts often lead to major fault lines being established at the start of a change process that may doom the initiative to failure.

The problem associated with culture and cultural change is the fact that everything is cultural. All forms of organizational expression can be regarded as cultural artifacts once they have been created i.e. performed. Therefore the selection process with regards to what aspects of the culture require changing is critical to the success of the change programme. Also it is more than helpful, if not essential to have a device one can employ to aid the analytical process and also a construct that one can analyze that can be used to identify and give a name to what it is one thinks requires changing or protecting. The analytical device used for developing the cultural change programme for organization X  was the “Cultural Web” developed by Gerry Johnson (2000) and the construct for identifying what aspects of culture need to be changed is that of “cultural themes” as proposed by the anthropologist Maurice Opler (1945) in his seminal paper “Themes as Dynamic Forces in Culture”. Cultural themes are defined by Opler as follows “a postulate or position, declared or implied, and usually controlling behavior or stimulating activity, which is tacitly approved or openly promoted in a society.” For example there may be a cultural theme that advocates short term thinking in a council department because of the historical nature of yearly budgeting. This theme may lead to the ingrained assumption amongst managers that there is little point thinking beyond the immediate as all that matters is the immediate needs as located within the yearly budget. This cultural theme and resulting assumption controls behavior and action as well as the ability of such managers to conceptualize strategy as a long term activity with any practical value. Each cultural theme has many cultural functions, one of which is to support and protect the core paradigm of the culture of the organization from change

In line with the above, the initial challenge for the senior team of Organization X was to define exactly what it was required to change in cultural terms. They understood that they required a more commercially orientated culture. What they could not clearly articulate was what exactly did they have to change to facilitate the emergence of a commercial culture from within the organization? They had to move from the generalization of statements such as “we need a more commercial culture”. They had spent six months developing both their business plan and the commercial strategy. The relationship between the successful delivery of strategy and the underlying culture of an organization has to be understood. As discussed above this involves being able to describe the culture at some kind of useful level and then through workshops consider the ways in which the culture will both constrain and energize the successful implementation and delivery of the new commercial strategy. This is far more difficult than it sounds in practice. Just like General Electric and their Work-Out programme this process should be facilitated by an outsider to the organization trained in organizational change interventions and in particular well schooled in managing cultural change processes. Cultural themes which had served the organization well in the old public sector model may prove to be dysfunctional in the new commercially driven LLP model.

Cultural theme analysis

Johnson (2000) developed a tool for carrying out cultural theme analysis in organizations that he called “The Cultural Web”. The Cultural Web is similar in both its theoretical and practical applications to Schein’s (1985)  model of culture and to the work of Douglas McGregor (1960) in terms of the emphasis both authors place on the assumptions and values that organizational leaders and their management teams hold as producing paradigm traps that constrain their expressive capacities. These paradigm traps can be interpreted as cultural expressions. Johnson (2000) argues that these paradigms are the very essence of organizational culture and can be used to understand the interdependency between the development, implementation and success of an organizational strategy and the culture of the organization. The cultural web is primarily a cultural diagnostic tool that may be used to explicate the cultural themes and assumptions that guide the expressive nature of management teams. The web is useful because it is constituted by eight cultural manifestations that when used in an analytical way provides a lens through which the underlying cultural themes which cross through departments and management teams can be identified. It can also help to describe the underlying paradigm that is imbedded in the inter subjectivity of organizational members. The following article reviews the application of the cultural web and can be found on the web site “Mind Tools.com, http://www.mindtools.com/pages/article/newSTR_90.htm

The Cultural Web

Aligning your organization’s culture with strategy

“Culture often becomes the focus of attention during periods of organizational change – when companies merge and their cultures clash, for example, or when growth and other strategic change mean that the existing culture becomes inappropriate, and hinders rather than supports progress. In more static environments, cultural issues may be responsible for low morale, absenteeism or high staff turnover, with all of the adverse effects those can have on productivity.

So, for all its elusiveness, corporate culture can have a huge impact on an organization’s work environment and output. This is why so much research has been done to pinpoint exactly what makes an effective corporate culture, and how to go about changing a culture that isn’t working.

Fortunately, while corporate culture can be elusive, approaches have been developed to help us look at it. Such approaches can play a key role in formulating strategy or planning change.

The Cultural Web, developed by Gerry Johnson and Kevan Scholes in 1992, provides one such approach for looking at and changing your organization’s culture. Using it, you can expose cultural assumptions and practices, and set to work aligning organizational elements with one another, and with your strategy.

Elements of the Cultural Web

The Cultural Web identifies six interrelated elements that help to make up what Johnson and Scholes call the “paradigm” – the pattern or model – of the work environment. By analyzing the factors in each, you can begin to see the bigger picture of your culture: what is working, what isn’t working, and what needs to be changed. The six elements are:

  1. Stories – The past events and people talked about inside and outside the company. Who and what the company chooses to immortalize says a great deal about what it values, and perceives as great behavior.
  2. Rituals and Routines – The daily behavior and actions of people that signal acceptable behavior. This determines what is expected to happen in given situations, and what is valued by management.
  3. Symbols – The visual representations of the company including logos, how plush the offices are, and the formal or informal dress codes.
  4. Organizational Structure - This includes both the structure defined by the organization chart, and the unwritten lines of power and influence that indicate whose contributions are most valued.
  5. Control Systems - The ways that the organization is controlled. These include financial systems, quality systems, and rewards (including the way they are measured and distributed within the organization.)
  6. Power Structures - The pockets of real power in the company. This may involve one or two key senior executives, a whole group of executives, or even a department. The key is that these people have the greatest amount of influence on decisions, operations, and strategic direction.

These elements are represented graphically as six semi-overlapping circles (see Figure 1 below), which together influence the cultural paradigm.

 

 

Using the Cultural Web

We use the Cultural Web firstly to look at organizational culture as it is now, secondly to look at how we want the culture to be, and thirdly to identify the differences between the two. These differences are the changes we need to make to achieve the high-performance culture that we want.

1. Analyzing Culture As It Is Now

Start by looking at each element separately, and asking yourself questions that help you determine the dominant factors in each element. Elements and related questions are shown below, illustrated with the example of a bodywork repair company.

Stories

  • What stories do people currently tell about your organization?
  • What reputation is communicated amongst your customers and other stakeholders?
  • What do these stories say about what your organization believes in?
  • What do employees talk about when they think of the history of the company?
  • What stories do they tell new people who join the company?
  • What heroes, villains and mavericks appear in these stories?

Examples (car bodywork repair company):

Rituals and Routines 

  • What do customers expect when they walk in?
  • What do employees expect?
  • What would be immediately obvious if changed?
  • What behavior do these routines encourage?
  • When a new problem is encountered, what rules do people apply when they solve it?
  • What core beliefs do these rituals reflect?

Examples:

  • Customers expect a newspaper and coffee whilst they wait, or a ride to work.  
  • Employees expect to have their time cards examined very carefully.
  • There’s lots of talk about money, and especially about how to cut costs.  

Symbols 

  • Is company-specific jargon or language used? How well known and usable by all is this?
  • Are there any status symbols used?
  • What image is associated with your organization, looking at this from the separate viewpoints of clients and staff?

Examples:

  • Bright red shuttle vans.
  • Bright red courtesy cars – compact, economy cars.
  • The boss wears overalls not a suit.

Organizational Structure

  • Is the structure flat or hierarchical? Formal or informal? Organic or mechanistic?
  • Where are the formal lines of authority?
  • Are there informal lines?

Examples:

  • Flat structure – Owner, Head Mechanic, Mechanics, Reception.
  • The receptionist is the owner’s wife so she goes straight to him with some customer complaints.
  • It’s each mechanic for himself – no sharing tools or supplies, little teamwork.

Control Systems

  • What process or procedure has the strongest controls? Weakest controls?
  • Is the company generally loosely or tightly controlled?
  • Do employees get rewarded for good work or penalized for poor work?
  • What reports are issued to keep control of operations, finance, etc…?

Examples:

  • Costs are highly controlled, and customers are billed for parts down to the last screw.
  • Quality is not emphasized. Getting the work done with the least amount of direct costs is the goal.
  • Employees docked pay if their quotes/estimates are more than 10% out.

Power Structures

  • Who has the real power in the organization?
  • What do these people believe and champion within the organization?
  • Who makes or influences decisions?
  • How is this power used or abused?

Example:

  • The owner believes in a low cost, high profit model, and is prepared to lose repeat customers.
  • The threat of docked pay keeps mechanics working with this model.

As these questions are answered, you start to build up a picture of what is influencing your corporate culture. Now you need to look at the web as a whole and make some generalized statements regarding the overall culture.

These statements about your corporate culture should:

  • Describe the culture; and
  • Identify the factors that are prevalent throughout the web.

In our example the common theme is tight cost control at the expense of quality, and at the expense of customer and employee satisfaction.

2. Analyzing Culture as You Want it to Be

With the picture of your current cultural web complete, now’s the time to repeat the process, thinking about the culture that you want. Starting from your organization’s strategy, think about how you want the organization’s culture to look, if everything were to be correctly aligned, and if you were to have the ideal corporate culture.

3. Mapping the Differences Between the Two

Now compare your two Cultural Web diagrams, and identify the differences between the two. Considering the organization’s strategic aims and objectives:

  • What cultural strengths have been highlighted by your analysis of the current culture?
  • What factors are hindering your strategy or are misaligned with one another?
  • What factors are detrimental to the health and productivity of your workplace?
  • What factors will you encourage and reinforce?
  • Which factors do you need to change?
  • What new beliefs and behaviors do you need to promote?

4. Prioritize Changes, and Develop a Plan to Address Them

Tip:
See our change management articles for more on managing change successfully.

Key points:

Used in this way, Johnson and Scholes’ Cultural Web helps you analyze your current culture, and identify what needs to stay, go or be added to if you’re to achieve your strategic goals.

Implementing cultural changes is not simple: it involves re-moulding values, beliefs and behavior, and it’s a major change management challenge, taking a great deal of time and hard work from everyone involved. By providing a framework for analyzing the current culture, and designing changes, Johnson and Scholes’ Cultural Web provides a good foundation for the difficult business of changing organization culture. Using it, you can create a cultural environment that encourages success, supports the organization’s objectives and, all-in-all, makes for a better place to work.” End of article.

The categories that constitute the cultural web are not exhaustive, for example the cultural web does not include explicitly; “forms of language”; “performance work” and “identity” as categories of cultural manifestation. However, it is comprehensive in that these three important cultural categories inevitably get into the web, albeit subsumed under a dominant category that hints towards a different theme as part of the analytical process.

Cultural diagnostic review

The cultural diagnostic stage of a cultural change programme should be carried out in advance of launching the pilot stage of the program. It can also be used as a means to audit the impact of the change process on participants mid way through the programme and some time after they have completed their involvement in the formal element of the cultural change programme. A key question to be considered is who is to carry out the cultural diagnostic review? If an internal agent does this it may be difficult for them to have credibility in such a role. It is also likely, unless they have been trained in such a research process that they may not have the skills of a researcher and interviewer to administrate the process with proper effect. It is standard practice to engage an external change partner  to carry out the cultural diagnosis.

The External Change Partner and the cultural web

The web is traditionally used in a group context with the aid of a change facilitator to enable group reflection with regard to cultural themes that the participants recognize as impacting on the organization. The diagnostic stage of a cultural change programme should be carried out in advance of launching the pilot. Detailed below is an example of a completed cultural web from a real organization:

The cultural diagnostic stage of a cultural change programme should be carried out in advance of launching the pilot stage of the program. It can also be used as a means to audit the impact of the change process on participants mid way through the programme and some time after they have completed their involvement in the formal element of the cultural change programme. A key question to be considered is who is to carry out the cultural diagnostic review? If an internal agent does this it may be difficult for them to have credibility in such a role. It is also likely, unless they have been trained in such a research process that they may not have the skills of a researcher and interviewer to administrate the process with proper effect. The web is traditionally used in a group context with the aid of a change facilitator to enable group reflection with regard to cultural themes that the participants recognize as impacting on the organization. The diagnostic stage of a cultural change programme should be carried out in advance of launching the pilot.

Summary

Any management team involved in cultural change efforts requires an understanding of what the new cultural values, assumptions, attitudes and behaviors of both management and staff should be to support the successful implementation of an organizational strategy. They have to be able to recognize the incompatibility of elements of the existing culture and the desired strategy. In sum cultural leaders need to be able to self reflect and analyze their own culture. They need to be able to identify what cultural themes still work for the organization and protect these and identify what themes are no longer fit for purpose and eradicate these and be imaginative enough to design new cultural themes that will be needed to support the new strategy and successfully implement these.